Madsen, a mine that formerly produced for 36 years, will have peak annual production of about 125,000oz/y in year five with average production in years three through seven of about 102,000oz from an 800 tonnes a day operation from a probable mineral reserve of 3.5 million tonnes grading 9 grams a tonne.

With an initial capital expenditure of C$95 million, Madsen will yield an after-tax net present value of $247 million at a 5% discount rate and an internal rate of return of 36%, with a 3.4 year payback of initial capital, a cash cost of $607/oz and all-in sustaining cost of $787/oz at a base case gold price of US$1,275/oz and Canadian to US dollar exchange rate of 0.75.

"The Madsen-Red Lake orebody meets the definition of world class or top tier. We have 4,000 ounces per vertical metre and with drilling to depths of 2.1km hitting the same rocks with the same alteration and the same grade, we could extend the mine 1km deeper and add millions of ounces more," said president and CEO Darin Labrenz during a conference call.

The total life of mine capex of $327 million was a significant increase over the $135 million in the September 2017 preliminary economic assessment, due to the inclusion of the shaft refurbishment into the sustaining costs, in addition to expanded mill throughput and the adoption of an owner-operated model.

Pure Gold's stock was down almost 14% on the day at 68c. 

With a 13-month development timeline, the company envisions first gold pour in May 2020 assuming an April construction start. Pure Gold appointed Endeavour Financial in August 2018 as its financial advisor regarding debt financing for Madsen. Discussions are underway with multiple potential financiers.

With exploration on various targets to now be stepped-up following the completion of the FS, the company may subsequently have an opportunity to increase its processing capacity. "800tpd is not fixed and we could possibly increase that if we find more resources to be able to produce at 100,000-150,000oz/y for over 10 years," said VP operations Ken Donner. "Madsen is big and it's going to get bigger," Labrenz said.

The project benefits from significant mining, milling and tailings infrastructure already in place. Mining will be conducted from a new ramp development utilising a combination of cut-and-fill and long-hole mining methods. A new hoist house and double drum production hoist will use the existing shaft infrastructure to hoist ore and waste from the mine, commencing in year four of operations.

With a 13-month total development timeline, the mine will use an owner-operated fleet of one and two boom electric hydraulic drill jumbos, 3 cubic-metre bucket LHDs and 20-tonne haul trucks. Mining will be facilitated by a combination of diesel and battery-powered equipment, with diesel equipment being used for upper mine levels prior to refurbishment of the existing shaft and installation of a new double-drum production hoist.

The existing mill and tailings management facility (TMF) will be upgraded to achieve mill production of 800tpd. Upgrades include modernisation of controls and instrumentation, installation of new pumps, two new batch gravity concentrators and expansion of the grinding circuit through the replacement of the ball mill.

The process plant will include one stage of crushing and two stages of grinding. The optimised flowsheet will include gravity concentration followed by cyanide leach, carbon adsorption/desorption and electrowinning with an overall recovery of 96% expected. Leached slurry from the carbon-in-pulp circuit will be treated with the SO2/air cyanide destruction process, and the final tailings will be processed and used underground as hydraulic fill or pumped to the TMF.

The FS focused exclusively on the Madsen deposit. Exploration has shown there are growth opportunities that may increase the mine life as it does not consider mineral resources at Russet South, Fork or Wedge that are to the southwest.  A preliminary economic assessment of these additional resources is nearing completion.

Pure Gold is also looking to target extensions to Madsen's geologic model as well as convert some 241,000oz (0.9Mt grading 8.4g/t) in inferred resources to measured and indicated. There is also depth extension possibility given that deep drilling has already intercepted mineralisation some 2.1km below surface and that Goldcorp's nearby Red Lake mine already produces from a greater depth than this.